Should Samsung take Android and run?

Apple certainly had a blow-out quarter (following on a whole series of blow-out quarters), but there is another company raking in money on mobile technology: Samsung. The South Korean company managed to bring in about $4.4 billion in profit for the first calendar quarter of 2012 — that puts the company on track to about $20 billion in profits for the year. Profits from the company’s handset division amounted to $3.7 billion during the quarter, with handset sales reportedly topping 90 million units — nearly half of which were smartphones. And the company is getting ready to amp up its game with the upcoming Galaxy S III, powered by a new quad-core, graphics-pumping Exynos processor.

The results make Samsung unique amongst mobile phone makers, at least in two ways: It’s the only company doing well with Android, and it seems to be the only company that can meaningfully compete with Apple. According to ComScore, Samsung accounted for more than a quarter of the U.S. mobile phone market in February. Apple was at 13.5 percent.

However, like all Android device makers, Samsung is between a rock and a hard place with the Android platform. It doesn’t control the development (that’s in Google’s hands), and carriers don’t want undifferentiated “stock” Android devices, which means Samsung is always behind the game trying to update and innovate the platform. Android 4.0 has been available for nearly six months, and the company has only this week gotten around to announcing some U.S. update plans. That lag is only going to be more of a problem once Google completes its acquisition of Motorola — a move which will almost certainly give Motorola the inside track on Android technology.

So — what if Samsung took a note from Amazon and decided to make its own version of Android?

What the fork?

Android is (ostensibly) a free and open-source operating system, which means literally anyone can come along, make a copy of the source code, and start working on their own independent operating system based on Android. In developer lingo, starting an independent software project from a copy of another project’s source code is loosely called “forking” — think of it like a fork in the road, where the original software takes one path, but a new project branches off at a certain point and goes its own way. Sometimes the two paths diverge radically; sometimes they run near each other and may even form a two-lane road for a while; once in a blue moon, they may even join back into the same path. Forking is most common in the open-source community, but it can happen with commercial software too, sometimes as part of a business or licensing arrangement.

By many measures, Android has already been forked — several times, in fact. One example is China’s Baidu Yi, and Android variant for the Chinese market primarily distinguished with Baidu apps replacing Google’s default Android services. Dell is making Baidu Yi hardware. (Another Chinese Android fork, OPhone, seems one the verge of fizzling out.)

Closer to home, Barnes & Noble created its own version of Android to power its Nook tablets, and — most successfully so far — Amazon created its own Android fork to power its Kindle Fire tablet. Both devices have something in common: They’re basically designed as gateways to the makers’ content ecosystems, and are not intended to function as members of the broader Android ecosystem. And, at least in Amazon’s case, the strategy seems to be working: ComScore says the Kindle Fire currently accounts for about half of all Android tablets. Yet out of the box, not one of them can access the Android Market (er, Google Play).

An amusing historical note: Android is itself a fork of the open-source Linux operating system. And the forks are veering back together a bit. Just last month, version 3.3 of the Linux kernel brought code from the Android kernel back into the mainline Linux code base.

Advantages for Samsung

Here’s the thing about code forking: historically, most code forks die. The effort and resources required to develop and support a complete project are usually far greater than just being a contributor or user of an existing project. (This is particularly true in the open-source community, where resources are sometimes non-existent or limited to goodwill.) However, Samsung plainly has the resources to maintain its own version of Android. The company is already investing in significant Android development to produce its TouchWiz interface overlay on Android, and the company can certainly afford to ramp up. After all, for the first quarter of 2012, Samsung’s profits were more than $1 billion greater than Google’s.

Forking Android would potentially enable Samsung to control its own mobile destiny. First, Samsung would no longer be dependent on Google’s developments schedule for releasing new versions of its operating system or introducing new hardware products. For Android developers, Google’s decision to roll out Ice Cream Sandwich in October 2011 (source code in November) was horrible timing: It meant that manufacturers were going into the lucrative end-of-year holiday season with devices running an obsolete version of Android. (And, as we know, most device makers still haven’t gotten ICS to owners of compatible devices.) If Samsung were developing its own mobile operating system, it could eliminate that kind of dependency.

Not being dependent on Google has another upside: Not having to compete with Google as an Android device maker. Google is in the final stages of acquiring Motorola Mobility, and while Google says it does not want to get into the phone business and will let Motorola operate more-or-less as an independent subsidiary, none of Google’s Android partners are pleased with the acquisition. There’s little doubt that Motorola will have preferred access to Android and Google technology, effectively making all other Android device makers — like Sony, HTC, LG, and Samsung — at best second-place finishers to Motorola and Google. And Google is on the verge of launching its own tablets — again, competing in the hardware market with its own Android partners. Samsung can sidestep that whole fight if it made its own version of Android.

Eliminating dependency on Google would also enable Samsung to innovate the operating system and its hardware in ways that, perhaps, Google will not — or may not get around to for some time. This can include Samsung-specific apps that (perhaps) enable deep integration with other Samsung products and services (like flat-screen televisions, or that movie service Samsung is reportedly planning to launch in the U.S., UK, Europe and Australia later this year). It could also enable Samsung to deeply customize its operating systems for particular markets, including China, southeast Asia, the Middle East, and Africa. Part of that might include hardware outside Google’s approved Android hardware specs (like support for China’s GPS equivalent Beidou), hardware-assisted speech recognition technology for Asian languages, or developing low-cost phones (perhaps without cameras, location services, or accelerometers) targeting emerging economies. Samsung could also look to pull an Amazon: develop media tablets targeting markets under-served or ignored by the likes of Amazon and Barnes & Noble. Right now, that’s everywhere that’s not the United States.

If this is starting to sound like a vertically integrated platform, that’s because it is. By eliminating a dependency on Google for its operating system, Samsung has a chance to control every major component that goes into its mobile products. The company already makes its own processors, is one of the leading makers of memory and storage, manufacturers its own displays, does its own industrial design, and has its own relationships with mobile operators around the world. If it can control the software on its devices, the Samsung ecosystem starts to look a lot more like Apple’s.

Looking for more vertical integration? Look to the cloud. Where Android device maker HTC is shutting down is own cloud-based services, Samsung is reportedly on the verge of firing up its own “S-Cloud” at a May 3 launch event in London for the Galaxy S III. One way Samsung could differentiate its own mobile operating system from stock Android would be through clever integration of synchronization, messaging, media storage, and apps through its own custom cloud service. If Samsung can do a good job with cloud services, it can not only compete with Apple’s iCloud, it could potentially out-Google Google, which is encountering significant skepticism with its new Google Drive service (in part due to privacy concerns).

Obstacles for Samsung

Walking away from the Android mainline is not without its costs. For one thing, Samsung would lose access to all the proprietary Google apps that it bundles with Android, but which aren’t actually part of the Android operating system itself. This includes things like Gmail, Google Maps, Google Search, and YouTube. Samsung would either need to find its own replacement apps and services — part of what would make forking Android an expensive and ambitious undertaking — or go without. Doing without those apps might be acceptable for purpose-specific devices like the Barnes & Noble Nook or Kindle Fire, but may not be a wise choice for a general-purpose smartphone or tablet.

An argument could be made that Android fragmentation would be tremendously amplified if Samsung were to launch its own Android fork. Fragmentation is already a huge problem for the Android ecosystem — Google itself contributed to the problem by essentially forking between Android 2.3 Gingerbread and the tablet-centric Android 3.0 Honeycomb, only to try to merge them back together in Android 4.0 Ice Cream Sandwich. (And ICS hasn’t solved much: Most Android users don’t have and many will only acquire if they buy new Android devices.) If Samsung — the most successful Android device maker in the market — were to take Android and go its own route, things could get even more confusing.

Another obstacle is content. Where Amazon and Barnes & Noble have content ecosystems they can use to support dedicated media tablets, Samsung does not. Although Samsung has been running media services for a while (and is working on that deal with Blockbuster), Samsung will need to make some major content deals if it wants its own mobile operating system to compete with Android and iOS. At this point, a mobile operating system without things like Netflix, Pandora, Spotify, and Amazon Prime is a tough sell.

And that gets to the crux of another problem: developers. Despite claims mobile developers would increasingly look at Android ICS as their first-choice development platform by mid-2012, app developers still look to Apple’s iOS first for a simple reason: iOS apps make more money. If Samsung were to launch its own mobile operating system, it somehow has to convince app developers to get on board. At least initially, Android developers would probably be able to bring apps over with a minimum of fuss, but as the forks diverged the barrier to entry would get larger. And developers would have to be convinced there was an upside to developing for Samsung’s operating system. True, Samsung is currently the world’s largest mobile phone maker, so — to an extent — Samsung devices have a built-in audience. But until this quarter Nokia was the world’s largest mobile phone maker, and that hasn’t lead to swarms of apps for Symbian or Windows Phone. In fact, Microsoft has had to pay developers to bring apps to Windows Phone. Samsung could easily face a similar dilemma.

Does Samsung need Google?

The question for Samsung is whether it needs to be part of the broader Android ecosystem to succeed in the mobile market — and to succeed against Apple. Taking on the complete task of mobile operating system development might seem like a tremendous risk, but Samsung is no stranger to the task: It still develops bada its own smartphone OS primarily aimed at Asian markets. Although Samsung has said it intends to merge bada with the Tizen open source mobile OS, it hasn’t actually happened yet. Samsung is in a better position to go it alone with an Android fork than any other phone maker on the planet.

But mobile OS’s aren’t just about hardware and software stacks; they’re about broader application and content ecosystems. Although the Android app universe is struggling in comparison to iOS, Samsung would essentially be starting over if it made its own fork of Android. As webOS and Windows Phone have discovered, that’s a tough place to be.

Finally, it’s important to remember Samsung isn’t really a mobile technology company. Samsung is massive. It makes everything from batteries to memory to televisions to processors, and through subsidiaries has its hands in things like theme parks, construction, and life insurance — heck, Samsung is one of the largest shipbuilders on the planet. Samsung employs more than 300,000 people worldwide. In contrast, Apple is an incredibly focused company: it employs about 60,000 people worldwide, and makes one phone, one tablet, the Apple TV, four media players, and five types of Macintosh computers.

Samsung may decide that going up against Apple at its own game just isn’t a smart move. Perhaps it’s safer — and more profitable — to enjoy the Android ride as long as it lasts, then switch to something else if that doesn’t work out.